Trend Analysis of Bajaj Auto in comparison with Hero Motocorp.

1. GROUP-3
PRAMIT JAIN- 20DM154
PRIYA THUKRAL- 20DM160
RAJU KUMAR- 20DM167
RISHABH KUMAR DAS- 20DM173
ROHITH RAJEEV- 20DM180
SANJAY PAREEK- 20DM187
FINANCIAL
ACCOUNTING
PROJECT

2. COMPANY ANALYSIS: AN
INTRODUCTION
Process of evaluating a company’s profitability, profile and products or
services.
1. Qualitative Factors of Analysis:
● Competitive Advantage
● Management
● Past Performance
● Corporate Governance
● Swot analysis
1. Quantitative Factors of Analysis
● The Balance Sheet
● The Income Statement
● Liquidity ratios

3. OVERVIEW OF BAJAJ AUTO LTD.

4. BUSINESS MODEL OF BAJAJ AUTO LIMITED
Bajaj Auto is engaged in the business of manufacturing and distribution of
automobiles such as motorcycles, commercial vehicles etc. and its accessories. The
Company sells its products in India as well as various other global markets i.e. in
more than 70 countries globally.
Bajaj Auto is the world’s 3rd largest manufacturer of motorcycles and the largest
manufacturer of three-wheelers. It has more than 10000 employees in its role
supporting various activities of the company across the delivery chain.

5. COMMON SIZE ANALYSIS OF BAJAJ AUTO
LTD. AND HERO MOTOCORP LTD.
• Net sale: Decrease in Bajaj auto Ltd is 1% while in Hero MotoCorp it is drop of 15%.
• Material cost as a Percentage of net sales for Hero MotoCorp is 69.08 and for Bajaj Auto Ltd.
is72.30.
• Expenses other than material cost are much higher in Hero MotoCorp.
• Result: PBDIT in case of Hero MotoCorp has decreased by16% and for Bajaj Auto ltd. it
increased to 3%.
• Decline in PBT to 3% as against 9% last year in case of Bajaj Auto Ltd. PBT at 13% in the year
2020 and 4% in the year 2019 in case of Hero MotoCorp.
• Despite PAT has increased for Bajaj Auto Ltd. by 424 crores and 248crores for Hero
MotoCorp the Net Profit Margin for Bajaj Auto Ltd. is 9.1% compared to 7.3% for Hero
MotoCorp.
Profit and Loss Account

6. BALANCE SHEET
• Bajaj auto is bigger a company than hero MotoCorp. Its balance sheet is 24,773.30
crores as against a mere 18,749.33 crores of hero MotoCorp.
• Out of total resources 29.71% of net fixed assets in case of hero MotoCorp;
28.12% in case of Bajaj auto are both turning over net sales of rs100 each.
• Investment at 65.2% in case of Bajaj auto is way ahead of 43.86% of hero
MotoCorp. Bajaj auto is sitting on a war chest ; will be able to encash any business Opportunity.
• Inventories of Bajaj auto at the level of just 4% as against 5.82% in case of
hero MotoCorp speak for efficient inventory management of the former.
• Ultimately Bajaj auto emerges to be a highly solvent; efficiently managed
company.

7. INTERPRETATION OF TREND ANALYSIS
Components Bajaj Hero
Which is
better
Net Sales Upward Trend Upward trend Hero
COGS Downward Trend Downward Trend Bajaj
Gross Profit Upward Trend Upward Trend Bajaj
PBDIT Upward Trend Upward Trend Bajaj
PBT Upward Trend Upward Trend Bajaj
Net Profit(PAT) Upward Trend Upward Trend Bajaj

8. 25164.92
30249.96 29918.6528836.1
33650.5 32230.5
0
10000
20000
30000
40000
2018 2019 2020
Net Sales
Bajaj Auto Hero Moto Corp
0
20000
40000
2018 2019 2020
Total Expenditure
Bajaj Auto Hero Moto Corp
Financial analysis

9. PROFITABILITY RATIO
sasa
0
2000
4000
6000
8000
2018 2019 2020
EBT
Bajaj Auto Hero Moto Corp
0
2000
4000
6000
2018 2019 2020
PAT
Bajaj Auto Hero Moto Corp
0
5000
10000
2018 2019 2020
EBITDA
Bajaj Auto Hero Moto Corp

10. SOLVENCY RATIO
0.00
0.10
0.20
0.30
0.40
2017-18 2018-19 2019-20 Industry
avg
0.25 0.26 0.24
0.32
DEBT TO EQUITY RATIO
0
5000
2017-18 2018-19 2019-20 Industry
avg
INTEREST COVERAGE
RATIO

11. ALARMING SIGNALS FROM COMPANY’S
FINANCIALS
The cash and cash equivalent ratio for the Bajaj Auto Limited was 0.80 which is less than 1
and as far as industry average is concerned it was 1.24.So, If the company has enough cash &
cash equivalents and marketable securities to cover for current liabilities, the cash ratio will
result in an amount greater than 1; otherwise, less than 1t

12. KEY FEATURES OF ACCOUNTING POLICY OF
BAJAJ AUTO LIMITED
Inventories are valued at cost arrived at on a weighted average basis or net
realizable value, whichever is lower
Depreciation is provided on a pro rata basis on straight line method to allocate
the cost, net of residual value over the estimated useful lives of the assets.

13. POTENTIAL SECURITIES IN THE
CAPITAL STRUCTURE
• The Company’s principal sources of liquidity are ‘cash and cash equivalents’
and cash flows that are generated from operations. The Company believes
that its working capital is sufficient to meet the financial liabilities within
maturity period. The Company has no outstanding term borrowings except
sales tax deferral liability amounting to 125.59 crore which are interest free
and are repayable after 13 years from the Balance Sheet date. Additionally,
the Company has invested its surplus funds in fixed income securities or
instruments of similar profile thereby ensuring safety of capital and
availability of liquidity as and when required. Hence the Company carries a
negligible liquidity risk.
• Bajaj Auto has only one class of Equity shares. In the event of Liquidation of
company, Common shareholders will be paid after the Debtors, since no
Preference shareholders are there.

14. OPERATING PERFORMANCE OF
THE COMPANY
So, coming to the assessment of Operating performance we can observe from
all the turnover ratios which we have calculated like inventory turnover days,
total assets turnover, fixed asset turnover and Return on asset ratio that Bajaj
Auto Limited is doing better than the industry average that shows the quality
of earning is also good in Bajaj Auto limited.

15. CONCLUSION
After all the analysis of balance sheet and profit and loss of Bajaj Auto Limited
and it’s comparison with that of the industry standard we come to a
conclusion that it is safe to give loan to Bajaj Auto Limited as it has better
Profitability and solvency ratios in comparison with the industry standards.
One more thing is important to note that Bajaj Auto has it’s financing more
from the equity capital instead of debt so it would be safer to provide loan to
them as they don’t have any other borrowing and they have a very robust
capital structure